WPX Energy sells Piceance assets for $910mn
OREANDA-NEWS. WPX Energy sold its natural gas assets in Colorado's Piceance basin for $910mn, tilting its output to favor crude oil.
With the sale, WPX will focus operations on its core areas in the prolific Permian basin in Texas and North Dakota's Williston basin. After the deal, crude will make up nearly half of WPX's total output, up from about 20pc last year.
"The move solidifies WPX as a Permian-focused company and provided a more balanced commodity mix," it said in a statement.
Alberta-based Terra Energy Partners will buy WPX Energy's fully owned subsidiary WPX Energy Rocky Mountain in the deal expected to close in the second quarter. Terra will also take on $100mn of transportation costs in exchange for more than $90mn of WPX's natural gas hedge value.
With the deal, WPX has completed nearly $1.5bn in asset sales since its acquisition of RKI Exploration & Production for $2.35bn in July, which marked its entry into the Permian basin. Since then, the independent has sold off assets including a gathering system in the San Juan basin of New Mexico for $309mn in December.
The Piceance deal gives the company the option to lower debt, fund for additional drilling, ability to investment on infrastructure such as expanding the Permian gathering system.
"Very positive to see a deal done in this commodity price environment and the continued transformation into an oil-focused producer," analysts at Tudor Pickering Holt (TPH) said. The deal will help WPX exceed its previous 2016 divestiture target of $400mn-$500mn and ease up investor concerns on the company's leverage since the Permian deal.
The deal may mark an uptick of mergers and acquisitions (M&A) in the US oil and gas industry as a plunge in crude oil prices to below $30/bl renders inadequate all other measures initiated so far to cut costs and shore up balance sheets. Independent producer Hess' chief executive John Hess had last month said: "Our 2016 focus is on the core of the core," outlining a broad trend that is likely to prevail across companies as they grapple with 12-year low prices and a bleak outlook.